Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.

Tuesday, January 22, 2013

JUST SAY "NO" TO HENRY AND RICHARD

Why
do I advise individuals not to use the services of a “fast food” tax
preparation chain?Here are two reasons
-

(1)As I have continually pointed out,
Henry and Richard, and the others of their “ilk”, ain’t cheap!Why?While,
like anything else, the market affects the price of tax preparation, the major
factor affecting the fees charged is overhead. Let’s look at the overhead of
these “fast food” chains.

Because
the storefronts where these chains are located are usually in high traffic
commercial areas, and often shopping malls, the rent is generally very high.
And an important factor – H+R Block and Liberty and Jackson Hewitt storefronts
are only open during the tax filing season, yet they must pay rent on the
property for the entire year.

These
chains have excessive advertising budgets during the season, spending millions
of dollars on constant tv and radio spots as well as print advertising telling
you not that they competently prepare accurate tax returns but simply to come
into their office and walk out with a check. Hey, doesn’t H+R advertise during
the Super Bowl.

H+R
Block et al are corporations, and have highly compensated upper level corporate
officers and employees with generous employee benefits. A while back the
Associated Press reported that “H&R
Block Inc. CEO Russell Smyth received compensation valued at $5.3 million in
fiscal 2009, the year he took over leadership of the nation's largest tax
preparer”.

With
commercial preparation chains I expect that the actual cost of preparing the
return - salaries paid to the seasonal preparers and the training of these
preparers - is one of the smallest items in the budget.

As
I have always said – when you use Henry and Richard you pay fancy restaurant
prices for fast food service.To be
honest I am not being fair to fast food franchises – I have actually received
good service at McDonalds and Burger Kings.

(2)A few years ago the Government
Accountability Office (GAO) conducted a study which resulted in a report to
Congress titled “Paid Return Preparers: In a Limited Study, Chain Preparers
Made Serious Errors”. This study was one of the reasons the IRS began its
investigation into the regulation of tax return preparers.

The
GAO sent undercover agents with two different tax scenarios to a total of 19
offices of 5 “fast-food” commercial tax chains, including H+R Block, in a
metropolitan area. In only 2 instances was the correct refund calculated, but
all 19 returns contained errors.

I
was surprised when I was told by the GAO at an IRS Nationwide Forum that not one of the 19 preparers in the study
had asked to see the undercover taxpayer’s prior year’s return!

Other
undercover operations, by the office of the Treasury Inspector General for Tax Administration
(TIGTA), local tax agencies, and consumer protection organizations, have found
similar results.These findings have led
to the current IRS tax return preparer regulation regime.

My
mentor always said he wished that H+R Block would open an office next door to
us.He felt we would make a fortune correcting
the errors made on H+R-prepared returns.

It
is better to be safe than sorry. I recommend that you do not use a “fast food” tax preparation chain to prepare your federal and state
income tax returns.

Of course I must end with the following disclaimer -

Iit may actually be possible that the best tax preparer, at the best price, for
your particular situation may be an H+R Block, or other fast-food
chain, employee. But this is only because of the education, experience, ability,
temperament, and other factors that are specific to that individual
preparer.

2 comments:

Anthony DiPierro, EA
said...

Seems to me your disclaimer negates your whole argument. There are good tax preparers who work for H&R Block and there are bad tax preparers who work for H&R Block, just like there are good tax preparers who don't work for H&R Block and there are bad tax preparers who don't work for H&R Block.

Before contacting me with questions about how a blog post relates to your specific situation, please be aware that I do not give free tax advice to non-clients by e-mail, comment response, or phone. So don't waste your time and mine.